STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RECOMMENDED ORDER

On October 2, 2009, an administrative hearing in this case was conducted by video teleconference between Tampa and Tallahassee, Florida, before William F. Quattlebaum, Administrative Law Judge, Division of Administrative Hearings.

APPEARANCES

For Petitioner: (No appearance)

For Respondent: Robert C. Large, Esquire

Department of Education

325 West Gaines Street, Suite 1244 Tallahassee, Florida 32399

STATEMENT OF THE ISSUE

The issue in this case is whether the Department of Education (Respondent) acted properly within its authority to claim lottery winnings of Kevin Frye (Petitioner).

PRELIMINARY STATEMENT

By letter dated May 13, 2009, the Respondent notified the Petitioner that the Florida Department of Lottery (Lottery) had transmitted the Petitioner's lottery winnings of $1,000 to the Respondent's Office of Student Financial Assistance. The Petitioner challenged the Respondent's action and requested an administrative hearing. The request was forwarded to the Division of Administrative Hearings, which scheduled and conducted the proceeding.

At the hearing, the Petitioner did not appear and was otherwise unrepresented. The Respondent presented the testimony of one witness and had Exhibits numbered 1 through 8 admitted into evidence.

The Transcript of the hearing was filed on October 21, 2009. The Respondent filed a Proposed Recommended Order that has been considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. At all times material to this case, the Petitioner was a borrower, participating in the federal student loan program.

2. Two of the loans involved funds disbursed in 2002, and the third involved funds disbursed in 2003. Repayment of the three loans was to begin in 2005.

3. The Respondent acted as the guarantee agency for the Petitioner's three loans under the federal student loan program.

4. The program provided that the Respondent was obligated to repay the loan in the event of default by the borrower. Such loans were regarded as in default after passage of a 270-day payment delinquency period.

5. Lenders reported defaulted loans by filing claims with the Respondent. The Respondent paid the claims and initiated a collection process to obtain the funds from the borrowers.

6. The Respondent became aware of the Petitioner's defaulted loans in February 2007, when claims were filed with the Respondent by the Petitioner's lender. The Respondent paid the claims and became the owner and holder of three promissory notes documenting the loans.

7. By letter dated March 24, 2009, the Respondent notified the Lottery that the Petitioner had outstanding student loans in the amount of $5,788.08. The amount included accrued interest as of April 8, 2009. The letter stated that such interest would continue to accrue according to the terms of the notes.

8. The letter requested that any lottery prize proceeds won by the Petitioner be transmitted to the Respondent to be credited towards the debt.

9. On April 9, 2009, the Lottery delivered a check in the amount of $1,000 to the Respondent with a letter identifying the amount as lottery winnings of the Petitioner.

10. By letter dated May 13, 2009, the Respondent advised the Petitioner that the lottery proceeds had been received and would be credited towards his student loan debt.

11. The Petitioner's request for hearing stated that he had entered into and completed a "loan rehabilitation" program and that "there is no reflection in outstanding loan balance that coincides with the lottery winnings."

12. Although the Respondent has a program designed to rehabilitate defaulted student loans, there was no evidence presented at the hearing that the Petitioner has entered into any rehabilitation agreement with the Respondent applicable to the debt obligations relevant to this dispute.

    CONCLUSIONS OF LAW

    
    

13. The Division of Administrative Hearings has jurisdiction over the parties to and subject matter of this proceeding. §§ 120.569 and 120.57(1), Fla. Stat. (2009).

14. The Respondent has the burden of establishing entitlement to the funds at issue in this case by a preponderance of the evidence. Balino v. Department of Health & Rehabilitative Services, 348 So. 2d 349 (Fla. 1st DCA 1977). In this case, the burden has been met.

15. Subsection 24.115(4), Florida Statutes (2009), which sets forth the Lottery's obligation to assist the debt collections efforts of other state agencies, provides as follows:

    It is the responsibility of the appropriate state agency and of the judicial branch to identify to the department, in the form and format prescribed by the department, persons owing an outstanding debt to any state agency or owing child support collected through a court, including spousal support or alimony for the spouse or former spouse of the obligor if the child support obligation is being enforced by the Department of Revenue. Prior to the payment of a prize of $600 or more to any claimant having such an outstanding obligation, the department shall transmit the amount of the debt to the agency claiming the debt and shall authorize payment of the balance to the prize winner after deduction of the debt. If a prize winner owes multiple debts subject to offset under this subsection and the prize is insufficient to cover all such debts, the amount of the prize shall be transmitted first to the agency claiming that past due child support is owed. If a balance of lottery prize remains after payment of past due child support, the remaining lottery prize amount shall be transmitted to other agencies claiming debts owed to the state, pro rata, based upon the ratio of the individual debt to the remaining debt owed to the state.

    
    

16. Under the Federal Family Education Loan Program, the Respondent is authorized to act as a guarantee agency for student loans, to pay the claims of lenders relative to defaulted loans for which the Respondent was the guarantor, and

    to initiate collection efforts to obtain payment of defaulted loans. See 20 U.S.C. § 1701, et seq., and § 1009.85, Fla. Stat. (2009).

17. The evidence in this case establishes that: the Petitioner had lottery winnings of $1,000; the Petitioner was in default of student loan obligations in excess of $1,000, which were due and owing to the Respondent; the Respondent properly notified the Lottery of the obligation; and the Lottery properly forwarded the Petitioner's prize winnings to the Respondent.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Department of Education enter a final order applying the $1,000 lottery prize winnings of Kevin Frye to the student loan debt referenced herein.

DONE AND ENTERED this 25th day of November, 2009, in Tallahassee, Leon County, Florida.

S

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 25th day of November, 2009.

COPIES FURNISHED:

Robert C. Large, Esquire Department of Education

325 West Gaines Street, Suite 1244 Tallahassee, Florida 32399

Kevin Frye

7429 Oakvista Circle

Tampa, Florida 33634

Lynn Abbott, Agency Clerk Department of Education Turlington Building, Suite 1514

325 West Gaines Street Tallahassee, Florida 32399-0400

Dr. Eric J. Smith, Commissioner of Education Department of Education

Turlington Building, Suite 1514

325 West Gaines Street Tallahassee, Florida 32399-0400

Deborah K. Kearney, General Counsel Department of Education

Turlington Building, Suite 1244

325 West Gaines Street Tallahassee, Florida 32399-0400

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.

Docket for Case No: 09-003964

Orders for Case No: 09-003964